Title Insurance

Daisy Rogozinsky
May 8, 2023

Title insurance can help provide important protection in real estate transactions. In this article, we’ll define the term “title insurance” and explain how it relates to real estate law. 

Key Takeaways

  • Title insurance protects property owners and lenders from financial losses arising from defects in a property’s title
  • Title insurance is purchased during the closing of a real estate transaction, with the cost based on the property’s purchase price
  • Potential title issues in real estate transactions include unknown liens, improperly recorded documents, fraud, and errors in public records
  • Real estate lawyers can review title insurance policies to ensure they provide adequate protection
  • Title insurance is mandatory in some jurisdictions

What Is Title Insurance?

Title insurance is a type of insurance policy that protects property owners and lenders from financial losses that may arise from defects in a property's title. The defects could include errors in public records, undisclosed liens, or fraudulent activity related to the property's ownership history. 

Title insurance policies typically cover the costs of legal defense in the event of a title dispute, as well as any financial losses incurred due to a defective title. The policy is purchased during the closing process of a real estate transaction, and the cost is usually based on the property's purchase price. Title insurance is important because it can help property owners avoid financial losses and legal disputes related to ownership of their property.

Title Insurance and Real Estate Law

The legal requirements surrounding the transfer of ownership and the recording of property transactions can be complex and varied, and title insurance plays an important role in helping to ensure that real estate transactions proceed smoothly.

Real estate transactions can involve a variety of potential title issues, including:

  • Unknown liens
  • Improperly recorded documents
  • Fraud
  • Errors in public records

Title insurance provides protection against these issues and can help property owners avoid costly legal battles and financial losses. Title insurance companies will typically conduct a thorough search of public records to identify any potential title defects before issuing a policy.

Real estate lawyers often work closely with title insurance companies to help ensure that the transfer of ownership of a property is legally sound and that any potential title issues are addressed before a transaction is completed. Lawyers may also review title insurance policies to ensure that they provide adequate protection for their clients.

In some jurisdictions, title insurance may be mandatory for real estate transactions, while in others, it may be optional. In any case, it is important for property owners and lenders to carefully consider the benefits of title insurance and to work with experienced real estate lawyers and title insurance providers to ensure that their interests are fully protected.

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